[Federal Register Volume 60, Number 191 (Tuesday, October 3, 1995)]
[Notices]
[Pages 51808-51817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24365]



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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Health Choice of Northwest Missouri, Inc., et 
al.; Proposed Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation, and a Competitive Impact Statement have been filed with 
the United States District Court for the Western District of Missouri 
in United States v. Health Choice of Northwest Missouri, Inc., et al., 
Civil No. 95-6171-CV-SJ-6 as to Health Choice of Northwest Missouri, 
Inc., Heartland Health Systems, Inc. and St. Joseph Physicians, Inc.
    The Complaint alleges that the defendants entered into an agreement 
with the purpose and effect of restraining competition unreasonably, in 
violation of Section 1 of the Sherman Act, 15 U.S.C. 1, by preventing 
managed care plans from developing in Buchanan County, Missouri.
    The proposed Final Judgment eliminates the continuance or 
recurrence of Defendants' agreement to prevent or delay the development 
of managed care in Buchanan County.
    Public comment on the proposed Final Judgment is invited within the 
statutory 60-day comment period. Such comments and responses thereto 
will be published in the Federal Register and filed with the Court. 
Comments should be directed to Gail Kursh, Chief; Professionals and 
Intellectual Property Section/Health Care Task Force; United States 
Department of Justice; Antitrust Division; 600 E Street, N.W.; Room 
9300; Washington, D.C., 20530 (telephone: 202/307-5799.
Rebecca P. Dick,
Deputy Director of Operations.

United States District Court for the Western District of Missouri

    In the matter of: United States or America, Plaintiff, vs. 
Health Choice of Northwest Missouri, Inc., Heartland Health System, 
Inc., and St. Joseph Physicians, Inc. Defendants Civil Action No. 
95-6171-CV-SJ-6.

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, that:
    1. The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the Western District of Missouri;
    2. The parties consent that a Final Judgment in the form hereto 
attached may be filed and entered by the Court, upon the motion of any 
party or upon the Court's own motion, at any time after compliance with 
the requirements of the Antitrust Procedures and Penalties Act (15 
U.S.C. 16), and without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent, 
which it may do at any time before the entry of the proposed Final 
Judgment by serving notice thereof on defendants and by filing that 
notice with the Court; and
    3. Defendants agree to be bound by the provisions of the proposed 
Final Judgment pending its approval by the Court. If plaintiff 
withdraws its consent, or if the proposed Final Judgment is not entered 
pursuant to the terms of the Stipulation, this Stipulation shall be of 
no effect whatsoever, and the making of this Stipulation shall be 
without prejudice to any party in this or in any other proceeding.

[[Page 51809]]

    For Plaintiff, United States of America:
Anne K. Bingaman,
Assistant Attorney General.
Rebecca P. Dick,
Deputy Director, Office of Operations.
Gail Kursh,
Chief, Professions & Intellectual Property Section, Antitrust Division, 
U.S. Department of Justice.

    For Defendant Health Choice of Northwest Missouri, Inc.:
510 Francis Avenue, St. Joseph, MO 64501.

    For Defendant Heartland Health System, Inc.
Thomas D. Watkins,
Watkins, Boulware, Lucas Miner, Murphy & Taylor, 3101 Frederick Avenue, 
St. Joseph, MO 64506.

    For Defendant St. Joseph Physicians, Inc.
Richard D. Raskin,
Sidley & Austin, One First National Plaza, Chicago, IL 60603, (312) 
853-2170.
Lawrence R. Fullerton,
Chief of Staff.
Edward D. Eliasberg, Jr.,
Dando B. Cellini,
Mark J. Botti,
John B. Arnett, Sr.,
Gregory S. Asciolla,
Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street, 
NW., Room 9429, BICN Bldg., Washington, DC 20530, (202) 307-0808.

United States District Court for the Western District of Missouri

    In the matter of: United States of America, Plaintiff, vs. 
Health Choice of Northwest Missouri, Inc., Heartland Health System, 
Inc., and St. Joseph Physicians, Inc., Defendants.

Final Judgment

    Plaintiff, the United States of America, having filed its Complaint 
on September 13, 1995, and plaintiff and defendants, by their 
respective attorneys, having consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law, and 
without this Final Judgment constituting any evidence against or an 
admission by any party with respect to any issue of fact or law;
    And Whereas defendants have agreed to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    Now, therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law, and upon consent of 
the parties, it is hereby ordered, adjudged, and decreed:

I

Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states claims upon which 
relief may be granted against the defendants under Section 1 of the 
Sherman Act, 15 U.S.C. 1.

II

Definitions

    As used in this Final Judgment:
    (A) ``Ancillary services'' means home health care, hospice care, 
outpatient rehabilitation services, and durable medical equipment.
    (B) ``Competing physicians'' means physicians in the same relevant 
physician market in separate medical practices.
    (C) ``General adult primary care'' (``GAPC'') means family practice 
and general internal medicine, whether or not physicians practicing in 
these areas are Board certified or Board eligible.
    (D) ``Health Choice'' means Health Choice of Northwest Missouri, 
Inc., each organization controlled by or under common control with it, 
and its directors, officers, agents, employees, and successors.
    (E) ``Heartland'' means Heartland Health System, Inc., each 
organization controlled by or under common control with it, and its 
directors, officers, agents, employees, and successors, but does not 
include Heartland Health Foundation.
    (F) ``Messenger model'' means the use of an agent or third party to 
convey to purchasers any information obtained from individual providers 
about the fees which each provider is willing to accept from such 
purchasers, and to convey to providers any contract offer made by a 
purchaser, where (1) each provider makes a separate, independent, and 
unilateral decision to accept or reject a purchaser's offer, (2) the 
fee information conveyed to purchasers is obtained separately from each 
individual provider, and (3) the agent or third party (a) does not 
negotiate collectively for the providers, (b) does not disseminate to 
any provider the agent's or third party's or any other provider's views 
or intentions as to the proposal and (c) does not otherwise serve to 
facilitate any agreement among providers on price or other significant 
terms of competition.
    (G) ``Non-Heartland physician'' means a physician who is not 
employed by Heartland and whose practice is not owned by Heartland.
    (H) ``Provider panel'' means those health care providers whom an 
organization authorizes to provide care to its enrollees and whom 
enrollees are given financial incentives to use.
    (I) ``Qualified managed care plan'' means an organization that is 
owned, in whole or in part, by any or all of the defendants and that 
offers a provider panel. A qualified managed care plan must satisfy 
each of the following criteria:
    (1) Its owners or not-for-profit members (``members'') who compete 
either with other owners or members or with providers participating on 
the organizations' provider panel (a) share substantial financial risk 
and (b) either directly or through ownership or membership in another 
organization comprise no more than 30% of the physicians in any 
relevant physician market, except that it may include Heartland, any 
single physician, or any single physician practice group for each 
relevant physician market,
    (2) it has a provider panel that includes no more than 30% of the 
physicians in any relevant physician market, unless, for those 
subcontracting physicians whose participation increases the panel 
beyond 30%, (a) there is a sufficient divergence of economic interest 
between those physicians and the owners or members of the organization 
so that the owners or members have the incentive to bargain down the 
fees of the subcontracting physicians, (b) the organization does not 
directly pass through to the payer substantial liability for making 
payments to the subcontracting physicians, and (c) the organization 
does not compensate those subcontracting physicians in a manner that 
substantially replicates ownership in the organization, and
    (3) it does not facilitate agreements between any subcontracting 
physicians and the owners or members concerning charges to payors not 
contracting with the organization.
    Nothing herein shall be deemed to limit the ability of a qualified 
managed care plan to create financial incentives for improved 
performance goals for a provider or the organization or to shift risk 
to a provider, consistent with this Paragraph.
    (J) ``Relevant physician market'' means GAPC physicians, 
pediatricians, obstetricians or gynecologists in Buchanan County, 
Missouri, unless defendants obtain plaintiff's prior written approval 
of a different definition for any or all of these markets, or any other 
relevant market for physician services. This definition is for the sole 
and limited purposes of this Final Judgment, and shall not constitute 
an admission or agreement that the 

[[Page 51810]]
relevant physician market for any other purpose is limited to Buchanan 
County, Missouri.
    (K) ``SJPI'' means St. Joseph Physicians, Inc., each organization 
controlled by or under common control with it, and its directors, 
officers, agents, employees, and successors.
    (L) ``Subcontracting physician'' means any physician who provides 
health care services to a qualified managed care plan, but does not 
hold, directly or indirectly, any ownership interest in that plan.
    (M) ``Substantial financial risk'' means financial risk such as 
that achieved when an organization receives revenue through capitation 
or payment of insurance premiums, or when the organization creates 
significant financial incentives for providers to achieve specified 
cost-containment goals, such as withholding a substantial amount of 
their compensation, with distribution of that amount made only if the 
cost-containment goals are met.

III

Applicability

    This Final Judgment applies to Health Choice, Heartland, and SJPI, 
and to all other persons who receive actual notice of this Final 
Judgment by personal service or otherwise and then act or participate 
in concert with any or all of the defendants.

IV

SJPI Injunctive Relief

    SJPI is enjoined from:
    (A) Requiring any physician to provide physician services 
exclusively through SJPI, Health Choice, or any managed care plan in 
which SJPI has an ownership interest, precluding any physician from 
contracting with any payor or urging any physician not to contract with 
another payor; provided that, nothing in this Final Judgment shall 
prohibit SJPI from paying dividends to its owners;
    (B) Disclosing to any physician any financial or price or similar 
competitively sensitive business information about any competing 
physician, except as is reasonably necessary for the operation of any 
qualified managed care plan in which SJPI has an ownership interest, or 
requiring any physician to disclose to SJPI any financial, price or 
similar competitively sensitive business information about any 
competitor of SJPI or managed care plan in which SJPI has an ownership 
interest; provided that, nothing in this Final Judgment shall prohibit 
the disclosure of information already generally available to the 
medical community or the public;
    (C) Setting the fees or other terms of reimbursement or negotiating 
for competing physicians unless SJPI is a qualified managed care plan; 
provided that, nothing in this Final Judgment shall prohibit SJPI from 
using a messenger model, even if SJPI is not a qualified managed care 
plan; and
    (D) Owning an interest in any organization that sets fees or other 
terms of reimbursement for, or negotiates for, competing physicians, 
unless that organization is a qualified managed care plan and complies 
with Paragraphs (A) and (B) of this Section IV of the Final Judgment as 
if those Paragraphs applied to that organization; provided that, 
nothing in this Final Judgment shall prohibit SJPI from owning an 
interest in an organization that uses a messenger model, even if the 
organization is not a qualified managed care plan.

Health Choice Injunctive Relief

    Except as permitted in Section VIII, Health Choice is enjoined 
from:
    (A) Requiring any physician to provide physician services 
exclusively through SJPI, Health Choice, or any managed care plan in 
which Health Choice has an ownership interest, precluding any physician 
from contracting with any payor, or urging any physician not to 
contract with another payor;
    (B) Disclosing to any physician any financial, price or similar 
competitively sensitive business information about any competing 
physician, except as is reasonably necessary for the operation of 
Health Choice or any managed care plan in which Health Choice has an 
ownership interest, or requiring any physician to disclose to Health 
Choice any financial, price or similar competitively sensitive business 
information about any competitor of Health Choice or any managed care 
plan in which Health Choice has an ownership interest; provided that, 
nothing in this Final Judgment shall probibit the disclosure of 
information already generally available to the medical community or the 
public;
    (C) Setting the fees or other terms of reimbursement or negotiating 
for competing physicians unless Health Choice is a qualified managed 
care plan; provided that, nothing in this Final Judgment shall prohibit 
Health Choice from using a messenger model, even if Health Choice is 
not a qualified managed care plan; and
    (D) Owning an interest in any organization that sets fees or other 
terms of reimbursement for, or negotiates for, competing physicians, 
unless that organization is a qualified managed care plan and complies 
with Paragraphs (A) and (B) of this Section V of the Final Judgment as 
if those Paragraphs applied to that organization; provided that, 
nothing in this Final Judgment shall prohibit Health Choice from owning 
an interest in an organization that uses a messenger model, even if the 
organization is not a qualified managed care plan.

VI

Heartland Injunctive Relief

    Except as permitted in Section VIII, Heartland is enjoined from:
    (A) (1) Disclosing to any person directly responsible for pricing 
physician or ancillary services of Heartland any price or, without 
appropriate consent, other proprietary business information about any 
other physician or ancillary services provider, except as is reasonably 
necessary for the operation of any qualified managed care plan in which 
Heartland has an ownership interest, and
    (2) Disclosing to any competing physician or ancillary services 
provider any price or, without appropriate consent, other proprietary 
business information about any other physician or ancillary services 
provider; provided that, nothing in this Final Judgment shall prohibit 
the disclosure of information already generally available to the 
medical community or the public;
    (B) Owning an interest in any organization that sets fees or other 
terms of reimbursement for, or negotiates for, competing physicians, 
unless that organization is a qualified managed care plan and complies 
with Paragraphs (A) and (B) of Section V of the Final Judgment as if 
those Paragraphs applied to that organizaton; provided that, nothing in 
this Final Judgment shall prohibit Heartland from owning an interest in 
an organization that uses a messenger model, even if the organization 
is not a qualified managed care plan;
    (C) Agreeing with a competitor to allocate or divide the market 
for, or set the price for, any competing service, except as is 
reasonably necessary for the operation of any qualified managed care 
plan or legitimate joint venture in which Heartland has an ownership 
interest;
    (D) Acquiring during the next five years:
    (1) The practice of any non-Heartland physician who at the filing 
of this Final Judgment has active staff privileges in family practice 
or general internal medicine (diagnosticians excluding subspecialties 
of internal medicine) or the practice of any physician who after 

[[Page 51811]]
the filing of this Final Judgment establishes a practice and provides 
services as a GAPC physician in Buchanan County, Missouri, without the 
prior written approval of the plaintiff; and
    (2) Any physician practice located in Buchanan County, Missouri 
that has provided services in Buchanan County, Missouri within five 
years prior to the date of the proposed acquisition, unless Heartland 
provides plaintiff with 90 days' prior written notice of the proposed 
acquisition; and
    (E) Conditioning the provision of any inpatient hospital service to 
patients of any competing managed care plan by making that service 
available only if the competing managed care plan;
    (1) Purchases or utilizes (a) Heartland's utilization review 
program, (b) any Heartland managed care plan, or (c) Heartland's 
ancillary or outpatient services or any physician's services, unless 
such services are intrinsically related to the provision of acute 
inpatient care, such as but not limited to where Heartland's provision 
of inpatient care inherently gives rise to Heartland bearing 
professional responsibility for such services, so long as Heartland 
otherwise makes its inpatient services available to competing managed 
care plans as set forth in this Paragraph; or
    (2) Contracts with or deals with Health Choice, Community Health 
Plan, or any other Heartland managed care plan.
    This Paragraph (E) shall not apply to any contract with an 
organization in which Heartland has a substantial financial risk.
    This Paragraph (E) shall not limit Heartland's ability to condition 
the provision of any inpatient hospital service on the purchase or 
utilization of ancillary or outpatient services or physician's services 
selected by Heartland, pursuant to any contract in which Heartland 
bears financial risk, so long as Heartland otherwise makes its 
inpatient services available to competing managed care plans as set 
forth in this Paragraph.

VII

Additional Provisions

    (A) Health Choice shall:
    (1) Inform each physician on its provider panel annually in writing 
that the physician is free to contract separately with any other 
managed care plan on any terms; and
    (2) Notify in writing each payor with which Health Choice has or is 
negotiating a contract that each provider on Health Choice's provider 
panel is free to contract separately with such payor on any terms, 
without consultation with Health Choice; and
    (B) Heartland shall:
    (1) Observe the attached and incorporated Heartland Referral Policy 
relating to the provision of ancillary services;
    (2) File with plaintiff each year on the anniversary of the filing 
of the Complaint in this action a written report disclosing the rates, 
terms, and conditions for inpatient hospital services Heartland 
provides to any managed care plan or hospice program, including those 
affiliated with Heartland. Plaintiff agrees not to disclose this 
information unless in connection with a proceeding to enforce this 
Final Judgment or pursuant to court or Congressional order; and
    (3) Give plaintiff reasonable access to its credentialing files for 
the purpose of determining if Heartland used its credentialing 
authority to deny hospital privileges to physicians employed by or 
otherwise affiliated with a competing managed care plan, provided 
Heartland is given all necessary authorizations for the release of such 
records.

VIII

Heartland Permitted Activities

    Notwithstanding any of the prohibitions or requirements of Sections 
IV through VII of this Final Judgment, Heartland may:
    (A) Own 100% of an organization that includes competing physicians 
on its provider panel and either uses a messenger model or sets fees or 
other terms of reimbursement or negotiates for physicians so long as 
the organization complies with Paragraphs (A) and (B) of Section V of 
the Final Judgment as if those Paragraphs applied to that organization, 
and with the subcontracting requirements of a qualified managed care 
plan;
    (B) Employ or acquire the practice of any physician not located in 
Buchanan County, Missouri, who derived less than 20% of his or her 
practice revenues from patients residing within Buchanan County, 
Missouri, in the year before the employment or acquisition;
    (C) If Plaintiff does not disapprove under the procedures set out 
in this Paragraph (C), employ or acquire the practice of any GAPC 
physician so long as Heartland incurs substantial costs recruiting such 
physician for the purpose of beginning the offering of GAPC services in 
Buchanan County, Missouri, or gives either substantial financial 
support or an income guarantee to such physician to induce that 
physician to begin offering GAPC services in Buchanan County, Missouri, 
and employs the physician or acquires the practice within two years of 
the physician first offering GAPC services in Buchanan County, 
Missouri. Heartland must give the plaintiff an opportunity to 
disapprove, by giving plaintiff 30 days prior written notice and such 
information in Heartland's possession as is necessary to determine 
whether the above criteria have been met. Plaintiff shall not 
disapprove if these criteria are met. If plaintiff disapproves, 
plaintiff will set forth the reasons for disapproval. If plaintiff 
fails to disapprove within 30 days of receipt of the requisite 
information, the criteria shall be deemed to have been met, and 
Heartland may employ or acquire the practice of the GAPC physician; and
    (D) With plaintiff's prior written approval, employ or acquire the 
practice of any physician who will cease to be a GAPC physician in 
Buchanan County, Missouri, unless Heartland acquires the practice or 
employs the physician.

IX

Judgment Modification

    In the event that any of the provisions of this Final Judgment 
proves impracticable as to any defendant or in the event of a 
significant change in fact or law, that defendant may move for, and 
plaintiff will reasonably consider, an appropriate modification of this 
Final Judgment. Nothing in this Section limits the right of any 
defendant to seek any modification of this Final Judgment it deems 
appropriate.

X

Compliance Program

    Each defendant shall maintain a judgment compliance program, which 
shall include:
    (A) Distributing within 60 days from the entry of this Final 
Judgment, a copy of the Final Judgment and Competitive Impact Statement 
to all senior administrative officers and directors;
    (B) Distributing in a timely manner a copy of the Final Judgment 
and Competitive Impact Statement to any person who succeeds to a 
position described in Paragraph (A) of this Section X;
    (C) Briefing annually those persons designated in Paragraphs (A) 
and (B) of this Section X on the meaning and requirements of this Final 
Judgment and the antitrust laws, including penalties for violation 
thereof;
    (D) Obtaining from those persons designated in Paragraphs (A) and 
(B) of this Section X annual written certifications that they (1) have 
read, understand, and agree to abide by this 

[[Page 51812]]
Final Judgment, (2) understand that their noncompliance with this Final 
Judgment may result in conviction for criminal contempt of court and 
imprisonment and/or fine, and (3) have reported any violation of this 
Final Judgment of which they are aware to counsel for the respective 
defendant; and
    (E) Maintaining for inspection by plaintiff a record of recipients 
to whom this Final Judgment and Competitive Impact Statement have been 
distributed and from whom annual written certifications regarding this 
Final Judgment have been received.

XI

Certifications

    (A) Within 75 days after entry of this Final Judgment, each 
defendant shall certify to plaintiff that it has made the distribution 
of the Final Judgment and Competitive Impact Statement as required by 
Paragraph (A) of Section X above;
    (B) For five years after the entry of this Final Judgment, on or 
before its anniversary date, each defendant shall certify annually to 
plaintiff whether it has complied with the provisions of Section X 
above applicable to it; and
    (C) Each defendant shall provide written notice to plaintiff if at 
any time during the period that this Final Judgment is in effect (1) 
that defendant owns an interest in a qualified managed care plan, (2) 
that qualified managed care plan includes among its owners or members 
any single physician practice group which comprises more than 30% of 
the physicians in any relevant physician market, and (3) that single 
physician practice group adds additional physicians.

XII

Plaintiff's Access

    For the sole purpose of determining or securing compliance with 
this Final Judgment, and subject to any recognized privilege, 
authorized representatives of the United States Department of Justice, 
upon written request of the Assistant Attorney General in charge of the 
Antitrust Division, shall on reasonable notice be permitted during the 
term of this Final Judgment:
    (A) Access during regular business hours of any defendant to 
inspect and copy all records and documents in the possession or under 
the control of that defendant relating to any matters contained in this 
Final Judgment;
    (B) To interview officers, directors, employees, and agents of any 
defendant, who may have counsel present, concerning such matters; and
    (C) To obtain written reports from any defendant, under oath if 
requested, relating to any matters contained in this Final Judgment.

XIII

Notifications

    To the extent that it may affect compliance obligations arising out 
of this Final Judgment, each defendant shall notify the plaintiff at 
least 30 days prior to any proposed (1) dissolution, (2) sale or 
assignment of claims or assets of that defendant resulting in the 
emergence of a successor corporation, or (3) change in corporate 
structure of that defendant.

XIV

Jurisdiction Retained

    This Court retains jurisdiction to enable any of the parties to 
this Final Judgment, but no other person, to apply to this Court at any 
time for further orders and directions as may be necessary or 
appropriate to carry out or construe this Final Judgment, to modify or 
terminate any of its provisions, to enforce compliance, and to punish 
violations of its provisions.

XV

Expiration of Final Judgment

    This Final Judgment shall expire five (5) years from the date of 
entry; provided that, before the expiration of this Final Judgment, 
plaintiff, after consultation with defendants and in plaintiff's sole 
discretion, may extend the judgment, except for Section VI(D), for an 
additional five years.

XVI

Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Dated:.----------------------------------------------------------------

----------------------------------------------------------------------
United States District Judge.

Referral Policy

I. General Statement

    After a patient or the patient's family or other appropriate 
person (collectively ``patient'') has been identified (via 
screening, assessment, discharge planning, staff, family, physician, 
or other means) as being in need of appropriate home health care, 
hospice, DME, or outpatient rehabilitation services (referred to 
collectively as ``Ancillary Service''), and, if necessary, a 
physician's order has been obtained, the following procedures will 
be used by a referring person when connecting patients to the 
appropriate Ancillary Service. Our focus is on patient choice.

II. Ancillary Service Referrals

    A. If a physician orders an Ancillary Service and specifies the 
provider to be used (whether specifically written in the chart or 
other written notification), then a referring person shall contact 
the patient indicating that the physician has ordered an Ancillary 
Service and has ordered that a particular provider be used. The 
patient should be asked whether this is acceptable, and if so, 
referred to that provider. (If the patient does not wish that 
provider, see subsection B below.)
    B. If a physician orders an Ancillary Service, but does not 
specify the provider to use, then the patient shall contacted and 
informed that his physician has ordered an Ancillary Service, and 
shall be asked if he has a preference as to which provider to use:
    1. If the patient has a preference, that preference shall 
honored.
    2. If the patient has no preference, a referring person shall 
indicate that Heartland has an excellent, fully accredited Ancillary 
Service that is available to the patient, and the appropriate 
Heartland brochure may be given. If the patient accepts, then the 
referral shall be made to Heartland's Ancillary Service.
    3. If the patient has not accepted Heartland's Ancillary Service 
(see subsection B(2) above), or asks what other providers are 
available, a referring person shall state that there are other 
providers in the community that offer the Ancillary Service; 
however, the referring person cannot make a recommendation as to 
these other providers, but there is a listing of them in the 
telephone book. [PATIENT SHALL BE GIVEN A REASONABLE AMOUNT OF TIME 
TO INVESTIGATE OTHER OPTIONS] If the patient at this point chooses a 
provider, that choice is to be honored. However, if the patient 
again requests that a referring person provide them with the names 
of other providers, the social worker should indicate that Heartland 
has done no independent review or evaluation of these providers and 
cannot speak to the quality of care they provide, and then verbally 
name these providers. The patient's choice shall be honored.

In the United States District Court for the Western District of 
Missouri

    In the matter of: United States of America, Plaintiff, vs. 
Health Choice of Northwest Missouri, Inc., Heartland Health System, 
Inc., and St. Joseph Physicians, Inc., Defendants. [Case No. 95-
6171-CV-SJ-6.]

Competitive Impact Statement

    Pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act, 15 U.S.C. 16(b)-(h) (``APPA''), the United States files this 
Competitive Impact Statement relating to the proposed Final Judgment 
submitted for entry in this civil antitrust proceeding.

I

Nature and Purpose of the Proceeding

    On September 13, 1995, the United States filed a civil antitrust 
Complaint 

[[Page 51813]]
alleging that defendant Health Choice of Northwest Missouri, Inc. 
(``Health Choice''), defendant Heartland Health System, Inc. 
(``Heartland''), and defendant St. Joseph Physicians, Inc. (``SJPI''), 
with others not named as defendants, entered into an agreement, the 
purpose and effect of which was to restrain competition unreasonably by 
preventing or delaying the development of managed care in Buchanan 
County, Missouri (``Buchanan County''), in violation of Section 1 of 
the Sherman Act, 15 U.S.C. 1. The Complaint seeks injunctive relief to 
enjoin continuance or recurrence of the violation.
    The United States filed with the Complaint a proposed Final 
Judgment intended to settle this matter. Entry of the proposed Final 
Judgment by the Court will terminate this action, except that the Court 
will retain jurisdiction over the matter for further proceedings that 
may be required to interpret, enforce, or modify the Judgment, or to 
punish violations of any of its provisions.
    Plaintiff and all defendants have stipulated that the Court may 
enter the proposed Final Judgment after compliance with the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (``APPA''), 
unless prior to entry plaintiff has withdrawn its consent. The proposed 
Final Judgment provides that its entry does not constitute any evidence 
against, or admission by, any party concerning any issue of fact or 
law.
    The present proceeding is designed to ensure full compliance with 
the public notice and other requirements of the APPA. In the 
Stipulation to the proposed Final Judgment, defendants have also agreed 
to be bound by the provisions of the proposed Final Judgment pending 
its entry by the Court.

II

Practices Giving Rise to the Alleged Violations

    SJPI is a Missouri for-profit corporation, with its principal place 
of business in St. Joseph, Missouri (``St. Joseph'').\1\ SJPI was 
incorporated in April 1986 by roughly 85 percent of the approximately 
130 physicians practicing or living in Buchanan County. The physicians 
who own SJPI have never integrated their separate, individual medical 
practices or shared substantial financial risk for SJPI's failure to 
achieve predetermined cost containment goals.

    \1\St. Joseph is the county seat of Buchanan County, which has a 
population of about 72,000 and is located about 55 miles northwest 
of Kansas City, Missouri.
---------------------------------------------------------------------------

    SJPI was formed primarily to negotiate collectively about fees and 
other contract terms with managed care plans seeking to enter Buchanan 
County. Managed care is a type of health care financing and delivery 
that seeks to contain costs through using administrative procedures and 
granting financial incentives to providers and patients. Typically, 
under such an approach, individual health care providers either are 
paid one set, predetermined fee for meeting all or nearly all of an 
enrollee's health care needs, regardless of the frequency or severity 
of the needed services, or are subject to a substantially discounted 
fee schedule and rigorous utilization review (i.e., assessment of the 
necessity and appropriateness of treatment). Beginning almost 
immediately after its incorporation, SJPI entered into fee negotiations 
collectively on behalf of its physicians with various managed care 
plans attempting to enter Buchanan County.
    Heartland operates the only acute care hospital in the three-county 
area of Buchanan and Andrew Counties, Missouri, and Doniphan County, 
Kansas.\2\ On several occasions before January 1990, Heartland 
supported SJPI's efforts to deal collectively with managed care plans 
seeking to enter Buchanan County, and, in at least one instance, 
represented SJPI in such dealings. Between April 1986 and December 
1989, no managed care plan was able to obtain a contract with SJPI or 
with any individual SJPI physician.

    \2\Heartland also provides home health care, hospice, 
rehabilitation, and other ``ancillary'' health care services in 
Buchanan County. There was some evidence that Heartland may have 
used its market power in inpatient hospital services to gain a 
competitive advantage in various ancillary health care services.
---------------------------------------------------------------------------

    In January 1990, SJPI and Heartland formed Health Choice, a for-
profit Missouri corporation, to provide managed care services to 
individuals in Buchanan County. Heartland and SJPI each own 50% of the 
common stock of Health Choice.
    The Health Choice physician provider panel consists of 
approximately 85% of the physicians working or residing in Buchanan 
County, including nearly all of the SJPI physicians. Heartland is the 
primary provider of hospital services for Health Choice.
    SJPI and Heartland established, through Health Choice, a 
utilization review program and a fee schedule for competing physicians 
in Buchanan County and agreed on several occasions that SJPI physicians 
and Heartland would deal with managed care plans only through Health 
Choice. In general, SJPI and Heartland advised managed care plans that 
they had to use Health Choice's provider panel, fee schedule, and 
utilization review program. At no time, however, did Heartland, SJPI or 
the physicians participating on the Health Choice provider panel share 
substantial risk in connection with the achievement by Health Choice of 
predetermined cost containment goals. Since the formation of Health 
Choice, no managed care plan has been able to enter Buchanan County 
without contracting with Health Choice, despite the efforts of several 
plans to do so. Because of the high percentage of local doctors 
participating in Health Choice, no managed care plan could assemble an 
adequate panel of providers without including some physicians who 
participated in Health Choice.\3\ By refusing to deal with managed care 
plans except through Health Choice, Heartland and SJPI physicians were 
able to obtain higher compensation and a more favorable hospital 
utilization review program from managed care plans than they would have 
been able to obtain independently.

    \3\Shortly before Health Choice became operational, HealthNet, a 
competing managed care plan, entered Buchanan County. HealthNet 
contracted with several self-insured plans in Buchanan County but 
with no managed care plans.
---------------------------------------------------------------------------

    Based on the facts described above, the Complaint alleges that the 
defendants entered into a contract, combination, or conspiracy to 
reduce or eliminate the development of managed care in Buchanan County 
in violation of Section 1 of the Sherman Act, 15 U.S.C. 1. The 
Complaint further alleges that this conduct had the effect of (1) 
unreasonably restraining price and other competition among managed care 
plans, (2) unreasonably restraining price competition among physicians, 
and (3) depriving consumers and third-party payors of the benefits of 
free and open competition in the purchase of health care services in 
Buchanan County.

III

Explanation of the Proposed Final Judgment

    The proposed Final Judgment is intended to prevent the continuance 
or recurrence of defendants' agreement to discourage the development of 
managed care in Buchanan County. The overarching goal of the proposed 
Final Judgment is to enjoin defendants from engaging in any activity 
that unreasonably restraints competition among physicians and among 
managed care plans in Buchanan County, while 

[[Page 51814]]
still permitting defendants to market a provider-controlled plan.\4\

    \4\This relief comports with the Statements of Enforcement 
Policy and Analytical Principles Relating to Health Care and 
Antitrust that the U.S. Department of Justice and the Federal Trade 
Commission issued jointly on September 27, 1994, 4 Trade Reg. Rep. 
(CCH) para.13,152, at 20,787-98, and in particular with the 
principles enunciated therein that a provider network (1) should not 
prevent the formation of rival networks; and (2) may not negotiate 
on behalf of providers, unless those providers share substantial 
financial risk or offer a new product to the market place. Statement 
8, id. at 20,788-89; Statement 9, id. at 20,793-94, 20,796.
---------------------------------------------------------------------------

A. Scope of the Proposed Final Judgment
    Section III of the proposed Final Judgment provides that the Final 
Judgment shall apply to defendants and to all other persons (including 
SJPI stockholders) who receive actual notice of this proposed Final 
Judgment by personal service or otherwise and then act or participate 
in concert with any defendant. The proposed Final Judgment applies to 
SJPI, Health Choice, Heartland, and Heartland's healthcare-related 
entities. The proposed Final Judgment does not apply to Heartland's 
entities that do not provide health care services.
B. Prohibitions and Obligations
    Sections IV through VIII of the proposed Final Judgment contain the 
substantive provisions of the consent decree. Section IV applies to 
SJPI, Section V to Health Choice, and Section VI to Heartland. Section 
VII contains additional provisions that apply to Health Choice and to 
Heartland. Section VIII applies only to Heartland.
    In Sections IV(A) and V(A), SJPI and Health Choice are enjoined 
from requiring any physician to provide physician services exclusively 
through SJPI, Health Choice, or any managed care plan in which SJPI or 
Health Choice has an ownership interest. SJPI and Health Choice are 
also barred from precluding any physician from contracting, or urging 
any physician not to contract, with any purchaser of physician 
services.
    Sections IV(B), V(B), and VI(A) prohibit the sharing of 
competitively sensitive information. SJPI, Health Choice, and Heartland 
are enjoined from disclosing to any physician any financial, price, or 
similarly competitively sensitive business information about any 
competing physician or any competitor of defendants. An exception 
permits any defendant to disclose such information if disclosure is 
reasonably necessary for the operation of a qualified managed care plan 
(``QMCP''--as defined in the proposed Final Judgment and discussed 
below) in which that defendant has an ownership interest, or if the 
information is already generally available to the medical community or 
the public.
    Sections IV(C) and V(C) prohibit fee setting and provide that SJPI 
and Health Choice, respectively, are enjoined from collectively 
negotiating or setting fees or other terms of reimbursement, or 
negotiating on behalf of competing physicians, unless the negotiating 
entity is a QMCP. However, SJPI and Health Choice are permitted to use 
a messenger model (as defined in the proposed Final Judgment and 
discussed below).
    Sections IV(D), V(D), and VI(B) enjoin SJPI, Health Choice, and 
Heartland, respectively, from owning an interest in any organization 
that sets fees or other terms of reimbursement, or negotiates for 
competing physicians, unless that organization is a QMCP and it 
complies with Sections IV(A) and (B) (for SJPI) and Sections V(A) and 
(B) (for Health Choice and Heartland). However, defendants may own an 
interest in an organization that uses a messenger model, as discussed 
below.
    Section VI(C) enjoins Heartland from agreeing with a competitor to 
allocate or divide any markets or set the price for any competing 
service, except as is reasonably necessary for the operation of any 
QMCP or legitimate joint venture in which Heartland has an ownership 
interest.\5\

    \5\Statements 2 and 3 of the Statements of Enforcement Policy 
and Analytical Principles Relating to Health Care and Antitrust, 4 
Trade Reg. Rep. (CCH) para.13,152 at 20,775-81 (1994), discuss how 
to assess whether collateral agreements are reasonably necessary for 
the operation of a particular legitimate joint venture.
---------------------------------------------------------------------------

    Section VI(D) enjoins Heartland from acquiring any family or 
general internal medicine practice without plaintiff's prior approval, 
or from acquiring any other physician practice located in Buchanan 
County without 90 days prior notification.
    Section VI(E) enjoins Heartland from conditioning the provision of 
its inpatient hospital services on the purchase or use of Heartland's 
utilization review program, managed care plan, or ancillary, 
outpatient, or physician services, unless such services are 
intrinsically related to the provision of acute inpatient care. (These 
prohibitions, however, do not apply to any organization or any contract 
in which Heartland has a substantial financial risk.)
    Section VII of the proposed Final Judgment contains additional 
provisions with respect to Health Choice and Heartland. Section VII(A) 
requires Health Choice to notify participating physicians annually that 
they are free to contract separately with any other managed care plan 
on any terms, and to notify in writing each payor with whom Health 
Choice has or is negotiating a contract that each of its participating 
physicians is free to contract separately with such payor on any terms 
and without consultation with Health Choice.
    Under Section VII(B)(1), Heartland is required to observe its 
formal written policy relating to the provision of ancillary services. 
This policy was developed by Heartland and is attached to the proposed 
Final Judgment. Heartland must under Section VII(B)(2) file with 
plaintiff annually on the anniversary of the filing of the Complaint a 
written report disclosing the rates, terms, and conditions for 
inpatient hospital services that Heartland provides to any managed care 
plan or hospice program, including those affiliated with Heartland.
    Heartland is required under Section VII(B)(3) to give plaintiff 
reasonable access to its credentialing files for the purpose of 
determining if Heartland misused its credentialing authority, such as 
by denying hospital privileges to physicians affiliated with managed 
care plans that compete with Health Choice.
    Section VIII permits Heartland to engage in certain activities. 
Under Section VIII(A), Heartland may own 100% of an organization that 
includes competing physicians on its provider panel and sets fees or 
other terms of reimbursement or negotiates for physicians, provided the 
organization complies with Sections V(A) and (B) and with the 
subcontracting requirements of a QMCP.
    Section VIII(B) permits Heartland to employ or acquire the practice 
of any physician not located in Buchanan County, who derived less than 
20% of his or her practice revenues from patients residing in Buchanan 
County in the year before employment or acquisition.
    Section VIII(C) permits Heartland to employ or acquire the practice 
of any general practice, family practice, or internal medicine 
physician, provided Heartland actively recruited the physician to begin 
offering those services in Buchanan County, gave either substantial 
financial support or an income guarantee to such physician, and is 
employing the physician or acquiring the practice within two years of 
the first offering of those services by that physician in Buchanan 
County. Heartland must give plaintiff 30 days notice and all 
information in its possession necessary to determine 

[[Page 51815]]
whether the above criteria have been met.
    Under Section VIII(D), Heartland may employ or acquire, with 
plaintiff's approval, any physician who would cease practicing in 
Buchanan County but for Heartland's employment or acquisition.
    Section IX of the proposed Final Judgment describes the 
circumstances under which defendants may seek a modification of the 
proposed Final Judgment. It provides that any defendant may move for a 
modification of the proposed Final Judgment, and plaintiff will 
reasonably consider an appropriate modification, in the event that any 
of the provisions of the proposed Final Judgment proves impracticable 
or in the event of a significant change in law or fact.
    Section X of the proposed Final Judgment requires the defendants to 
implement a judgment compliance program. Section X(A) requires that 
within 60 days of entry of the Final Judgment, defendants must provide 
a copy of the proposed Final Judgment and the Competitive Impact 
Statement to certain officers and all directors. Sections X (B) and (C) 
require defendants to provide a copy of the proposed Final Judgment and 
Competitive Impact Statement to persons who assume those positions in 
the future and to brief such persons annually on the meaning and 
requirements of the proposed Final Judgment and the antitrust laws, 
including penalties for violating them. Section X(D) requires 
defendants to maintain records of such persons' written certifications 
indicating that they (1) have read, understand, and agree to abide by 
the terms of the proposed Final Judgment, (2) understand that their 
noncompliance with the proposed Final Judgment may result in conviction 
for criminal contempt of court, and imprisonment, and/or fine, and (3) 
have reported any violation of the proposed Final Judgment of which 
they are aware to counsel for defendants. Section X(E) requires 
defendants to maintain for inspection by plaintiff a record of 
recipients to whom the proposed Final Judgment and Competitive Impact 
Statement have been distributed and from whom annual written 
certifications regarding the proposed Final Judgment have been 
received.
    The proposed Final Judgment also contains provisions in Section XI 
requiring defendants to certify their compliance with specified 
obligations of Section IV through X of the proposed Final Judgment. 
Section XII of the proposed Final Judgment sets forth a series of 
measures by which the plaintiff may have access to information needed 
to determine or secure defendants' compliance with the proposed Final 
Judgment. Section XIII provides that each defendant must notify 
plaintiff of any proposed change in corporate structure at least 30 
days before that change to the extent the change may affect compliance 
obligations arising out of the proposed Final Judgment.
    Finally, Section XV states that the decree expires five years from 
the date of entry, except that plaintiff during that five year period 
may, in its sole discretion, after consultation with defendants, extend 
for an additional five years all provisions of the decree except the 
provisions of Section VI(D), that portion of the Final Judgment dealing 
with Heartland's acquisition of physician practices.
C. Effect of the Proposed Final Judgment on Competition
1. The Prohibitions on Setting and Negotiating Fees and Other Contract 
Terms
    The prohibitions on setting and negotiating fees and other contract 
terms set forth in Sections IV (C) and (D), V (C) and (D), and VI(B) 
provide defendants with essentially two options for complying with the 
proposed Final Judgment.\6\ First, Health Choice may change its manner 
of operation and no longer set or negotiate fees on behalf of competing 
physicians, for example by using a ``messenger model,'' a term defined 
in the proposed Final Judgment. Second, Health Choice may restructure 
its ownership and provider panels to become a QMCP.\7\

    \6\For convenience, this Statement discusses Health Choice's 
options. However, the same options are available to SJPI and 
Heartland, should they choose to utilize them.
    \7\Of course, Health Choice could simply cease operations and 
dissolve. Defendants have indicated, however, that they will not 
pursue that approach. In any event, the Judgment's prohibitions on 
setting and negotiating fees and other contract terms (as well as a 
number of other prohibitions) apply to any organization in which the 
defendants own an interest, not just to Health Choice.
---------------------------------------------------------------------------

    Currently, SJPI owns 50% of Health Choice and includes among its 
shareholders competing physicians who do not share substantial 
financial risk. In addition, Heartland, which owns the other 50% of 
Health Choice, employs physicians who compete with the SJPI physicians 
and other physicians on the Health Choice provider panel. The SJPI and 
Heartland physicians on the provider panel also do not share financial 
risk. The proposed Final Judgment prevents Health Choice, under its 
present structure, from continuing to set or negotiate fees or other 
terms of reimbursement collectively on behalf of these competing 
physicians. (Section V(C).)\8\ Such conduct would constitute naked 
price fixing. Arizone v. Maricopa County Medical Soc'y, 457 U.S. 332, 
356-57 (1982).

    \8\Similarly, Section IV(C) prevents SJPI from setting or 
negotiating fees and other contract terms for just SJPI physicians, 
and Sections (V(D) and VI(B) prevent physicians and Heartland from 
engaging in such conduct through their ownership of Health Choice.
---------------------------------------------------------------------------

    The proposed Final Judgment does not, however, prohibit Health 
Choice as presently structured from engaging in activities that are not 
anticompetitive.\9\ In particular, while the proposed Judgment enjoins 
Health Choice from engaging in price fixing or similar anticompetitive 
conduct, it permits Health Choice to use an agent or third party to 
facilitate the transfer of information between individual physicians 
and purchasers of physician services. Appropriately designed and 
administered, such messenger models rarely present substantial 
competitive concerns and indeed have the potential to reduce the 
transition costs of negotiations between health plans and numerous 
physicians.

    \9\For example, nothing in the proposed Final Judgment prevents 
Health Choice from continuing to offer billing, utilization 
management, and third party administrator services, provided it does 
not violate the Judgment's prohibitions, in Sections V (A) and (B), 
on exclusivity and the collection and dissemination of competitively 
sensitive information.
---------------------------------------------------------------------------

    The proposed Final Judgment makes clear that the critical feature 
of a properly devised and operated messenger model is that individual 
providers make their own separate decisions about whether to accept or 
reject a purchaser's proposal, independent of other physicians' 
decisions and without any influence by the messenger. (Section II(F).) 
The messenger may not, under the proposed Judgment, coordinate 
individual providers' responses to a particular proposal, disseminate 
to physicians the messenger's or other physicians' views or intentions 
concerning the proposal, act as an agent for collective negotiation and 
agreement, or otherwise serve to facilitate collusive behavior.\10\ The 


[[Page 51816]]
proper role of the messenger is simply to facilitate the transfer of 
information between purchasers of physician services and individual 
physicians or physician group practices and not to coordinate or 
otherwise influence the physicians decision-making process.\11\

    \10\For example, it would be a violation of the proposed Final 
Judgment if the messenger selected a fee for a particular procedure 
from a range of fees previously authorized by the individual 
physician, or if the messenger were to convey collective price 
offers from physicians to purchasers or negotiate collective 
agreements with purchasers on behalf of physicians. This would be so 
even if individual physicians were given the opportunity to ``opt 
out'' of any agreement. In each instance, it would really be the 
messenger, not the individual physician, who would be making the 
critical decision, and the purchaser would be faced with the 
prospect of a collective response.
    \11\For example, the messenger may convey to a physician 
objective or empirical information about proposed contract terms, 
convey to a purchaser any individual physician's acceptance or 
rejection of a contract offer, canvass member physicians for the 
rates at which each would be willing to contract even before a 
purchaser's offer is made, and charge a reasonable, non-
discriminatory fee for messenger services, provided the messenger 
otherwise acts consistently with the proposed Final Judgment.
---------------------------------------------------------------------------

    If, on the other hand, Health Choice wants to negotiate on behalf 
of competing physicians, it must restructure itself to meet the 
requirements of a QMCP as set forth in the proposed Final Judgment. To 
comply, (1) the owners of members of Health Choice (to the extent they 
compete with other owners or members or compete with physicians on 
Health Choice's provider panels) must share substantial financial risk, 
and comprise no more than 30% of the physicians in any relevant market; 
and (2) to the extent Health Choice has a provider panel that exceeds 
30% of the physicians in any relevant market, there must be a 
divergence of economic interest between the Health Choice owners and 
the subcontracting physicians, such that the owners have the incentive 
to bargain down the fees of the subcontracting physicians. (Section 
II(I)(2).) As explained below, the requirements of a QMCP are necessary 
to avoid the creation of a physician cartel while at the same time 
allowing payors access to such panel.
    The financial risk-sharing requirement of a QMCP ensures that the 
physician owners in the venture share a clear economic incentive to 
achieve substantial cost savings and provide better services at lower 
prices to consumers. This requirement is applicable to all provider-
controlled organizations since without this requirement a network of 
competing providers would have both the incentive and the ability to 
increase prices for health care services.
    The requirement that a QMCP not include more than 30% of the local 
physicians in certain instances is designed to ensure that there are 
available sufficient remaining physicians in the market with the 
incentive to contract with competing managed care plans or to form 
their own plans. This limitation is particularly critical in this case 
in view of the defendants' prior conduct in forming negotiating groups 
with up to 85% of the local physicians.
    Many employers and payors in the St. Joseph area indicated that 
they may want managed care products with all or many of the physicians 
in St. Joseph on the provider panel. The QMCP's subcontracting 
requirements are designed to let Health Choice (or any other QMCP) 
offer a large physician panel, but with restrictions to avoid the risk 
of competitive harm. To offer panels above 30%, Health Choice must 
operate with the same incentives as a nonprovider-controlled plan. 
Specifically, the owners of Health Choice must bear significant 
financial risk for the payments to, and utilization practices of, the 
panel physicians. These requirements prevent Health Choice from using 
the subcontracts as a mechanism for increasing fees for physician 
services.
    Consequently, the proposed Final Judgment permits a QMCP to 
subcontract with any number of physicians in a market provided three 
important safeguards are met. Under Section II(I)(2) of the proposed 
Final Judgment, the subcontracting physician panel may exceed the 30% 
limitation only if (1) there is a sufficient divergence of economic 
interest between those subcontracting physicians and the owners such 
that the owners have the incentive to bargain down the fees of the 
subcontracting physicians, (2) the organization does not directly pass 
through to the payor substantial liability for making payments to the 
subcontracting physicians, and (3) the organization does not compensate 
those subcontracting physicians in a manner that substantially 
replicates ownership.
    Health Choice would meet the subcontracting requirements if, for 
example, Health Choice were compensated on a capitated, per diem, or a 
diagnostic related group basis and, in turn, reimbursed subcontracting 
physicians pursuant to a fee schedule. In such a situation, an increase 
in the fee schedule to subcontracting physicians during the term of the 
Health Choice contract with the particular payor would not be directly 
passed through to the payor and, instead, would be borne by Health 
Choice itself. This would provide a substantial incentive for Health 
Choice to bargain down its fees to the subcontracting physicians.
    On the other hand, the subcontracting requirements would not be met 
if a Health Choice contract with a payor were structured so that 
significant changes in the payments by Health Choice to its physicians 
directly affected payments from the payor to Health Choice, or if the 
payor directly bears the risk for paying the panel physicians or pays 
the panel physicians pursuant to a fee-for-service schedule. The 
requirements would also not be satisfied if contracts between Health 
Choice and the subcontracting physicians provided that payments to the 
physicians depended on, or varied in response to, the terms and 
conditions of Health Choice's contracts with payors.\12\ Any of these 
scenarios would permit Health Choice to pass through to payors, rather 
than bear, the risk that its provider panel will charge fees that are 
too high or deliver services ineffectively.\13\

    \12\Nothing in the proposed Final Judgment prohibits Health 
Choice or any other QMCP from entering into arrangements that shift 
risk to providers so long as those provisions are consistent with 
the criteria for a QMCP set forth in Section II(I) of the Judgment.
    \13\Similarly, Health Choice would fail the ownership 
replication restriction of Section II(I) of the proposed Final 
Judgment if, for example, the owners paid themselves a dividend and 
then, through declaration of a bonus, paid the same or similar 
amount to the subcontracting physicians. The same would be true if 
the owners otherwise structured dividends, bonuses, and incentive 
payments in such a way that ensures that subcontracting and owning 
physicians receive equal overall compensation.
---------------------------------------------------------------------------

2. Prohibition on Exclusivity
    Sections IV(A), V(A), and VI(B) of the proposed Final Judgment 
enjoin defendants from requiring physicians to deal exclusively with 
their managed care plans or urging physicians not to contract with 
other payors. Health choice is also required to inform both its 
providers and payors with which it has or is negotiating contracts, 
that each provider is free to contract separately with any managed care 
plan on any terms. (Section VII(A) (1) and (2).) These provisions will 
encourage the development of competing managed care plans in the St. 
Joseph area by ensuring that physicians remain free to decide 
individually whether, and on what terms, to participate in any managed 
care plan.
3. Physician Acquisitions
    Section VI(D) of the proposed Final Judgment enjoins Heartland from 
acquiring additional family practice and general internal medicine 
physician practices in Buchanan County without plaintiff's prior 
written approval, and from acquiring any other active physician 
practice in Buchanan County without 90 days' prior notification.\14\ 

[[Page 51817]]
These provisions will prevent Heartland from obtaining such physician 
concentration that would permit it to raise prices for physician 
services above competitive levels or otherwise thwart the ability of 
competing managed care plans to enter and compete effectively in St. 
Joseph.\15\

    \14\By letter dated June 8, 1995, from Chief of Staff, Antitrust 
Division, Lawrence R. Fullerton, to counsel for Heartland, Thomas P. 
Watkins, Esq., plaintiff has indicated to Heartland that it does not 
intend to challenge the acquisition of Internal Medicine Associates 
of St. Joseph, a three-physician practice group providing general 
internal medicine services in St. Joseph. (See Attachment.)
    \15\The proposed Final Judgment permits Heartland to employ or 
acquire other physician practices where the employment or 
acquisition would not result in a substantial lessening of 
competition in the St. Joseph area either because (1) the physician 
derived only limited revenues from patients in Buchanan County, (2) 
Heartland actively recruited the physician to the St. Joseph area, 
or (3) the physician would exit the market but for Heartland's 
employment or acquisition. (Section VIII (B), (C) and (d).)
---------------------------------------------------------------------------

4. Other Substantive Provisions
    Sections IV(B), V(B), and VI(A) of the proposed Final Judgment 
enjoin the disclosure to any physician of any financial or 
competitively sensitive business information about any competing 
physician or competitor of defendants. These provisions will ensure 
that defendants do not exchange information that could lead to price 
fixing or other anticompetitive harm.
    Section VII(B)(3) provides plaintiff access to Heartland's 
credentialing files to ensure that Heartland does not abuse its 
credentialing authority by denying privileges to or otherwise 
disciplining physicians who participate in a competing managed care 
plan. Similarly, Section VII(B)(1) requires Heartland to abide by its 
formal written referral policy regarding ancillary services to ensure 
that Heartland will not abuse its control over inpatient hospital 
services to reduce or eliminate competition among providers of 
ancillary services in St. Joseph.
    Section VI(E) enjoins Heartland from requiring managed care plans 
to use other Heartland services such as its utilization review program 
or managed care plan in order to obtain inpatient hospital services. 
This Section will permit managed care plans to use their own physician 
panels, utilization review, and fee schedule, thereby fostering the 
development of truly competitive health care delivery systems in St. 
Joseph.
    Section VII(B)(2) requires Heartland to file annually with 
plaintiff a report of the rates, terms, and conditions for inpatient 
hospital services that Heartland provides any managed care plan or 
hospice program. This will assist plaintiff in assessing whether 
Heartland has abused its power in the inpatient hospital market.
    Finally, Section XI(C) requires any defendant owning an interest in 
a QMCP that includes any single physician practice group comprising 
more than 30% of the physicians in any relevant market to notify 
plaintiff if the practice group acquires additional physicians. This 
will ensure that the United States knows of any such acquisition and 
can evaluate its potential anticompetitive effects.
5. Conclusion
    The Department of Justice believes that the proposed Final Judgment 
contains adequate provisions to prevent further violations of the type 
upon which the Complaint is based and to remedy the effects of the 
alleged conspiracy. The proposed Final Judgment's injunctions will 
restore the benefits of free and open competition in St. Joseph and 
will provide consumers with a border selection of competitive health 
care plans.

IV

Alternatives to the Proposed Final Judgment

    The alternative to the proposed Final Judgment would be a full 
trial on the merits of the case. In the view of the Department of 
Justice, such a trial would involve substantial costs to both the 
United States and defendants and is not warranted because the proposed 
Final Judgment provides all of the relief necessary to remedy the 
violations of the Sherman Act alleged in the Complaint.

V

Remedies Available to Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages suffered, as well as costs and a reasonable attorney's fee. 
Entry of the proposed Final Judgment will neither impair nor assist in 
the bringing of such actions. Under the provisions of Section 5(a) of 
the Clayton Act, 15 U.S.C. 16(a), the proposed Final Judgment has no 
prima facie effect in any subsequent lawsuits that may be brought 
against one or more defendants in this matter.

VI

Procedures Available for Modification of the Proposed Final Judgment

    As provided by Sections 2 (b) and (d) of the APPA, 15 U.S.C. 16 (b) 
and (d), any person believing that the proposed Final Judgment should 
be modified may submit written comments to Gail Kursh, Chief; 
Professions & Intellectual Property Section/Health Care Task Force; 
Department of Justice; Antitrust Division; 600 E Street, N.W.; Room 
9300; Washington, D.C. 20530, within the 60-day period provided by the 
Act. Comments received, and the Government's responses to them, will be 
filed with the Court and published in the Federal Register. All 
comments will be given due consideration by the Department of Justice, 
which remains free, pursuant to Paragraph 2 of the Stipulation, to 
withdraw its consent to the proposed Final judgment at any time before 
its entry, if the Department should determine that some modification of 
the Final Judgment is necessary for the public interest. Moreover, the 
proposed Final Judgment provides in section XIV that the Court will 
retain jurisdiction over this action, and that the parties may apply to 
the Court for such orders as may be necessary or appropriate for the 
modification, interpretation, or enforcement of the proposed Final 
Judgment.

VII

Determinative Documents

    No materials and documents of the type described in Section 2(b) of 
the APPA, 15 U.S.C. 16(b), were considered in formulating the proposed 
Final Judgment. Consequently, none are filed herewith.

    Dated: September 13, 1995.

    Respectfully submitted,
Edward D. Eliasberg, Jr.,
John B. Arnett, Sr.,
Dando B. Cellini,
Mark J. Botti,
Gregory S. Asciolla,
Attorneys, Antitrust Division, U.S. Dept. of Justice, 600 E Street, 
N.W., Room 9420, Washington, D.C. 20530, (202) 307-0808.
[FR Doc. 95-24365 Filed 10-2-95; 8:45 am]
BILLING CODE 4410-01-M